May 082017
 

How to Invest in U.S. Infrastructure 

Donald Trump’s policies focus on building infrastructure and prioritizing America first. With the U.S. economy growing stronger than Canada’s, I believe this is a good time to look south of the border for opportunities. Thanks to the Trump rally, the S&P 500 market index in the U.S. is up about 7% year to date. It appears the market could reach even higher by the end of the year. 🙂

One way to invest in a country’s growing infrastructure is to buy ownership in stable, and profitable cement and construction companies! But the concrete business isn’t always what it’s cracked up to be. 😄 There is a lot of competition in this space so it’s important to invest smartly. I have done research into several companies such as Martin Marietta Materials (MLM), Vulcan Materials (VMC), and others. But the company I liked most was Summit Materials Inc (NYSE:SUM)

Summit Materials is in the business of cement and small rocks called aggregates used to make roads and buildings. In addition to supplying aggregates to its customers, the company also uses its materials internally to produce ready-mix concrete and asphalt paving mix production. I like the widespread geography that Summit is operating in. It conducts business in over 20 states, including Texas, which borders Mexico. I’m looking forward to that wall being built. 🙂

I guess you can say this company rocks. 😄 Valuation wise SUM is slightly expensive, but is actually fairly valued when compared to its competitors in the market. Over the last year the company earned $0.88 per share. According to analysts, the company is expected to grow its earnings at 10.5% a year over the long run. We can use the Graham Formula which I’ve explained here, to determine the fair market value of this stock.

Doing so will give us a Graham value of $25.96 per share. (V = 0.88 x (8.5 + 2 * 10.5)

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